Experimental Study And Application For The Term Structure Of Interest Rates

At Dec 1st 2006, China's finance service industry will open due to the promises about the entry WTO. But take Banks as a representative finance industry, we could find the truth that domestic finance institutions have little competition capacity, lots of bad debts and hidden risks, and the hole industry face lots of pressure. Proceed from the pressure, China ultimately take reformation to the system of banks, exchange rate, and interest rates. At Jul 2005, China's central bank announces that china will put floating exchange rate into practice, which based on market supplies and demands. Floating interest rate will make essential infection to financial resource collocating. In past several years, China's bond market has get far-reaching improvements, and products innovations emerge in endlessly. The research of term structure of interest rates can give the pricing foundation of the capital market, and promote bond market's development, enrich central bank's control instruments, boost interest rate's floating, advance finance institutions' abilities of risk control, and at last make the financial system more steady.Firstly, this paper summarizes the developing process of rate term structure in China and abroad. Secondly, it studied the four kind of traditional theories of rate term structure: expectation theory, market segmentation theory, preferred habitat theory and liquidity preferred theory, and the advantages and disadvantages of each. Then, it discussed the latest development of modern theory of rate term structure, especially the two main models: general equilibrium model and no-arbitrage model after the 1980's.The main part of this paper is the empirical research of Chinese bonds' interest-rate term structure. This dissertation's research on the term structure of interest rate can be separated into two parts: static state and dynamic state. The aims of the static state are to construct a yield curve on relationship of zero-coupon bonds' interest rate and maturities. This dissertation firstly analyzes various kinds of theories on the construction of interest rate term structure. Based on the SSE's bonds trading data,it undertakes an empirical research which finds out that Nelson-Siegel method is more suitable for Chinese market when taking into consideration of spline method and Nelson-Siegel method. It finds out that Chinese interest rate term structure is in line with traditional expectation theory and liquidity preference theory basically. The dynamic research emphasizes on how the whole interest rate term structure changes with time. The paper use GMM and ML methods to experiment the motion of Chinese short-term interest rate by through Vasicek model, the CIR model and the CKLS model, estimate three parameters, and getting the conclusion that the CKLS model is the best fitting Chinese short-term interest rate.Finally, it applies the interest rate term structure theories to actual situation. It researched the interest rate term structure theories in the monetary policy, the interest rate risk management and list price of apply etc.